Sundaymail Editor
Africa Moyo
THE debate on whether the Zimbabwe Electricity Supply Authority (Zesa) should make another application for a tariff increase should become clearer soon after an international consultant — believed to be Deloitte — hired by the Zimbabwe Energy Regulatory (zera) to look into the efficiencies of the power utility finalised the report.Zera argues that Zesa can avoid the proposed 49 percent hike through eliminating inefficiencies “inherent” in its organisational structure and distribution infrastructure. The energy regulators’ presumption was the basis used to reject last year’s application.
Zimbabwe Electricity Transmission and Distribution Company (ZETDC), a unit of the parastatal which interfaces with energy consumers, is owed more than US$1 billion in unpaid bills. There has been no tariff increase for the past five years.
However, it is the input from the consultant that is expected to chart the way forward. The Sunday Mail Business has established that the report is however supposed to go through the bureaucratic process.
Zera’s technical director Engineer Misheck Siyakatshana last week said: “The report is not yet finalised but once it is finalised, it will be sent to the Minister (of Energy and Power Development Dr Samuel Undenge).”
A 49 percent tariff increase will push charges for domestic consumers to US14,6c per kilowatt hours (kWh) from the current US9,86c. Gold miners get electricity at US12c per kWh, but they still want it to be reviewed downwards.
In a bind
But Zesa, which claims it doesn’t have an inefficient structure, is in a bind.
Deputy board chairperson Engineer Ben Rafemoyo told The Sunday Mail Business the utility was failing to recoup the investments it puts into generation, transmission and distribution.
He noted that the study on Zesa’s cost build-up is essential to put the argument to rest.
“The approach taken by Government through Zera is good in that at some point you need an independent auditor. I know Zera is independent, but Government wanted a really independent body, free from politics and interest.
“If the report comes out saying there are inefficiencies at Zesa, I wouldn’t support management or anyone to say ‘let’s burden customers to carry those inefficiencies’. It’s something they must address and be given a tariff that does not encourage them to remain inefficient.
“But from the books of accounts, from the numbers people are looking at, the widely perceived inefficiencies are not that apparent. We haven’t seen anywhere where you can say there are inefficiencies. We could have dealt with that a long time ago,” explained Eng Rafemoyo, who is the immediate past CEO of the group.
There is suspicion that Zesa transmission and distribution network is fraught with energy leaks that make it inefficient.
Structure and perks
In addition, there have also been arguments that the unbundling of the parastal in 2004 into four strategic business units (SBU’s) — the ZETDC, Zimbabwe Power Company (ZPC), Zesa Enterprises (ZENT), PowerTel Communications — created a monolithic structure that is inherently inefficient.
Market watchers say such an arrangement creates separate cost centres where much of the resources are earmarked for management salaries and perks.
Engineer Rafemoyo, who was involved in the exercise, disagrees. “For all intents and purposes, in terms of perks and so forth, it’s just nice titles . . .
“Of course people can see that things have been changing because those old days, people used to drive inferior vehicles than those you find today, like everywhere else.
“At that time, a 504 was a very important vehicle only driven by permanent secretaries and deputy ministers, but today things have changed and there are Jeep Cherokees and so on,” he observed.
The exercise, he says, resulted in significant cost savings as the workforces was slashed by 3 000 workers to about 7 000.
It is also believed the current salaries are monitored by the Board.According to Zesa’s the group’s salaries are presently “below 20 percent” of the total costs.
Fears of mounting debts
Engineer Rafemoyo says Zera has to “bite the bullet now”, for further postponement will likely feed into the parastatal’s soaring debts.
“We may defer doing the right thing but when we decide to do it in the future, it would be more costly, both to the individuals and the economy at large.
“If you check the prices they were paying for power imports four, five years ago, and where the prices are now pegged at; they are way, way different. And to expect that our costs internally would remain the same or the income of Zesa should remain where it was five years, may be just deferring the problem by a few more days but it will soon catch up with us,” he noted.
Much of the concerns are driven by losses being realised in selling power at a discount to local consumers from rices being levelled on Zesa by Mozambique’s Hidroelectrica de Cahora Bassa (HCB), which supplies 50 megawatts (50MW).
Eskom of South Africa, which exports 300MW to Zimbabwe, charges between US13c and US14c per kWh. In 2013, Norconsult, a consultancy firm, suggested a cost of at least 14c per kWh could be viable.
Experts say it is not prudent to generally compare regional tariffs as some utilities get Government subsidies.
Government, which is presently constrained by competing national requirements, is unable to subsidise the sector.
As of Thursday last week, Zimbabwe was generating 739MW from Kariba (hydro) and 419MW from Hwange.
Munyati, Harare and Bulawayo thermal power station were not generating any power. Zimbabwe has a mix of hydro and thermal electricity, whose generation costs vary.
Hydroelectricity, which accounts for 20 percent of electricity generated in the world, is relatively cheaper to generate than thermal power.
Modern hydro turbines can convert as much as 90 percent of the available energy into electricity, while the best fossil fuel plants, including thermal power, are only about 50 percent efficient.
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